Turkish Law Blog
Case of Adaptation in Coronavirus Pandemic
We are going through an extraordinary period. While the world keeps fighting with the COVID-19 pandemic, we witness serious effects of the epidemic on health, and also impact on political developments, economy, trade, education, production and tourism sectors. As a result of globalization, it is an indisputable fact that how great and serious results this period has and will have.
In Turkey, many measures are taken within the scope of combating the epidemic; one of the most important measures taken is to temporarily interrupt the commercial activities of 149,382 workplaces across the country with the "Circular of Coronary Infections" which sent to all provinces by the Ministry of Internal Affairs. Many businesses that are not covered by the Circular have also significantly reduced or stopped their commercial activities in order not to risk their employees.
Consequently, there is a problem with how these workplaces, which temporarily stopped or reduce their activities, will fulfill their debts arising from their contracts, especially office lease debts. Because, fulfilling debts have become impossible or significantly difficult for the workplaces in question. Although the principle of “pacta sunt servanda / contractual commitment” is the basis of the contract law, it is not possible to apply this principle in all circumstances; Exceptional conditions may be applied if the trading basis collapses. In this article, we will discuss how the contracts can be adapted to changing conditions and what rights the debtor has regarding performance in case of collapse of the basis of the transaction.
2. Collapse of the Basis of the Transaction
As we indicated, in accordance with the contract law, the contract between the parties is established on the basis of the principle of pacta sunt servanda. Under this principle, even if the conditions were later aggravated for one of the parties, especially for the debtor, and the balance of execution changed due to subsequent events; the debtor must fulfill his debt (1). In other words, contractual commitment is essential to the parties and adaptation of the contract according to changing conditions is an exceptional situation which shall be applied in the presence of conditions regulated by law.Article 138 of the Turkish Code of Obligations No. 6098, titled “Overdue Difficulty”, is an exception to the principle of commitment to the contract. With the aforementioned article, the debtor has a chance to refuse fulfill, on condition that more effort needed than reasonable measures require for fulfilling. The criterion of plausibility is determined by comparing the ratio of the effort required by the debtor to the benefit of the creditor by the performed contract. It is accepted as collapse of the basis of the transaction; if performance of the contract is not impossible, however the effort required for performance is quite non-proportional in the creditor's interest (2). In other words, if the balance between the actions deteriorates to an unpredictable and extraordinary manner, to a great extent against one of the parties; the victim has been granted the right to request that the contract be adapted to changing conditions, or to return from the contract and to request the termination of the contract.
“III. Overdue DifficultyArticle 138 - An extraordinary situation which is not foreseen by the parties at the time of the contract and which is not expected to be anticipated, arises from a reason not due to the debtor and changes the existing facts at the time against the debtor in such a way as to violate the rules of honesty, If the debtor has not yet fulfilled his / her obligations arising from the excessive difficulty of the performance, the debtor shall have the right to request from the judge the adaptation of the contract to the new conditions and to revoke the contract if this is not possible. In contracts of continuing obligations debtor shall terminate the contract.This provision also applies to foreign currency debts”
As can be seen, with the article 138 of the Turkish Code of Obligations, the contract debtor will be able to ask the court to adapt the contract to new conditions in the event that the collapse of the basis of the transaction, and if this is not possible, he can use the right to return from the contract or terminate the contract. The legislator explicitly stated the conditions required to request adaptation of the contract to changing conditions. According to this;
- The ex-post situation must be an extraordinary situation that the parties did not anticipate and cannot anticipate at the time of the contract.
- This extraordinary situation must have occurred for a reason not caused by the debtor.
- This situation should have changed the current conditions at the time of the contract against the debtor, which would be against the rule of honesty, to ask for the performance of the debtor.
- The debtor should not yet perform his debt, or he should perform by reserving his rights arising from excessive difficulty in performance.
When we consider these conditions together, it is evident that the coronavirus epidemic that affects the whole world and the temporarily stopping commercial activities of the listed workplaces applied in Turkey within the scope of the epidemic are extraordinary situation which is not anticipated by the parties and has not occurred for a reason not caused by the debtor. However, it is also steady that the situation in question has aggravated the existing conditions at the time of the establishment of the contracts in a way that will be against the debtor of the contract; Because expecting to fulfill of the debtor whose workplaces that cannot carry out their commercial activities and thus cannot earn their income under normal conditions is clearly contrary to the rule of honesty.In this context, businesses that are decided to interrupt their commercial activities with the Circular of Coronary Measures may request the adaptation of their debts arising from the contracts they have entered into, in the scope of Article 138 of the Turkish Code of Obligations, especially in rental debts. If adaptation is not possible they can use the right to return from the contract or terminate the contract.
3. Adaptation of Office Lease Debts
First of all, it should be indicated that, as a rule, there is no chance for the impossibility of performance in money debts. Therefore, the end of the debt due to the impossibility of performance within the scope of Article 136 of the Turkish Code of Obligations cannot be implemented in money debts (lease debt, loan debt, etc.). For this reason, since the subject of debt is money, the debtor may request from the Civil Court of Peace, where the leased property is located, to adapt the contract to changing conditions, and to decide that the debtor will be freed from the obligation to perform completely or partially.Also worth mentioning is the legal arrangement in the Temporary Article 2 of Law No. 7226 published in the Official Gazette on 26 March 2020 which states that “Failure to pay the rental price to be processed from 1/3/2020 until 30/6/2020 does not constitute a reason for termination and evacuation of the lease”. This arrangement should not be interpreted broadly; in other words, it should not be understood that it eliminates the payment of the workplace rent payment between 01/03/2020 - 30/06/2020. The lease agreements of the business owners regarding the specified dates will continue to make provisions, and hence the lease payment debt will continue. With the aforementioned regulation, the leaseholder has been prevented from terminating the lease contract or exercising his rights to evict the tenant if only the rental fees for the specified dates are not paid. However, the lessor’s right to demand the lease regarding the dates 01/03/2020 - 30/06/2020 continues. If the rental price is not paid without any court decision regarding adaptation, the lessee will be able to apply for legal proceedings against the debtor and to claim the rent with delay interest.
Celal Ülgen, (2002), Uyarlama Davaları, Mevzuat Dergisi, Sayı 49 https://www.mevzuatdergisi.com/2002/01a/03.htm
Gülmelahat Doğan, Aşırı İfa Güçlüğü Nedeniyle Sözleşmenin Değişen Koşullara Uyarlanması, Hakemli Makaleler. http://tbbdergisi.barobirlik.org.tr/m2014-111-1358
The Turkish Code of Obligations Numbered 6098:https://www.mevzuat.gov.tr/MevzuatMetin/1.5.6098.pdf
Law No 7226 promulgated 26/03/2020:https://www.resmigazete.gov.tr/eskiler/2020/03/20200326M1-1.htm